Question

Perfect Fit Company sells men's shirts and jeans. The average selling price and variable cost for each product follow: Selling price per shirt $22 Selling price per jean $27 Variable cost per shirt $14 Variable cost per jean $19 Fixed costs $3,200 Calculate the breakeven point in units assuming the sales mix is 1:1.

Answer 1

Answer:

Jeans= 200 units

Shirt= 200 units

Explanation:

To calculate the break-even point in units, we need to use the following formula:

Break-even point (units)= Total fixed costs / Weighted average contribution margin

Weighted average contribution margin= (weighted average selling price - weighted average unitary variable cost)

Weighted average contribution margin= (22*0.5 + 27*0.5) - (14*0.5 + 19*0.5)

Weighted average contribution margin= 8

Break-even point (units)= 3,200/8

Break-even point (units)= 400 units

Jeans= 0.5*400= 200 units

Shirt= 0.5*400= 200 units